Hike in federal minimum wage could cost half million jobs

WASHINGTON — A report by Congress’ nonpartisan budget analysts seems to have thrown Democrats onto the defensive after it concluded that the party’s drive to boost the federal minimum wage could cost a half-million jobs by 2016.

A Congressional Budget Office report released yesterday concluded that a gradual increase to $10.10 an hour by that year — which is what President Barack Obama and congressional Democrats are seeking — would increase pay for more than 16.5 million people, mostly those earning low wages. It also would lift 900,000 people above the federal poverty threshold, the report said.

But Democrats from the White House to Capitol Hill contested another of the report’s conclusions: that the increase would reduce jobs in 2016 by roughly 500,000, or 0.3 percent.

A minimum wage boost can cost jobs because employers can compensate for their higher wage costs by raising prices. That can prompt consumers to purchase fewer goods and services and, in turn, encourage companies to hire fewer workers, the report said.